Dec 03, 2003

Perfect Information, under an umbrella

It seems to me --- and I live in a city where for most people taxis are a somewhat unusual means of getting around --- that the argument (should anyone make it) for total deregulation falters on this point: its difficult to have Perfect Information under an umbrella. A "perfect market" is one in which both buyers and sellers are aware of the market i.e. of what other people are paying. That's why the insider-trading of stocks, which undermines confidence in one's ability to be able to accurately gauge what is happening, may be good for some individuals but is bad for capitalism in general.

(It's parallel to the reason why laws which regulate weights-and-measures --- scales and pumps, for instance --- are so essential to a well-functioning capitalist market: who wants to have to carry a pure "pound" around so that you can test every scale at which you want to buy a 1/4 pounder?)

The now-and-then taxi rider cannot possibly be in a position to know the prevailing rate for taxis or to bargain with a taxi-driver, especially when standing under an umbrella in a rain storm.

One can of course counter: "So what? The question to you, buddy, is 'Well what's it worth to get home out of the rain?' "

True enough, but there is also a social value to having a taxi system and that means that riders must feel some confidence about knowng what they are (literally) getting into and drivers must be able to make a living at it.

So there is some place for regulation of one or a few of the variables in a taxi market, a market which provides both functionality and comfort to a city. Exactly how to do it, I don't know as I have never been asked. But the idea of a totally unregulated market in taxi service strikes me as unconvincing and implausible.